Leasing vs Tenancy: The 2 Key Differences That You Should Know

Leasing vs Tenancy: The 2 Key Differences That You Should Know

The terms ‘lease’ and ‘tenancy’ are often used interchangeably. But both are actually not the same in legal terms. What exactly are the differences between ‘lease’ and ‘tenancy’? The two key differences between lease and tenancy are the duration and the requirement of registration.

What is a Lease?

Basically the word ‘lease’ means ‘to rent’.

A ‘lessor’ is a person who owns a property and grants a lease to the ‘lessee’ who pays certain sum of money to the lessor in return for the benefits of using the property under stipulated conditions.

Requirement of Lease Registration

Under the National Land Code, all leases have to be registered. This registration will result in the details of lease being endorsed on property registration documents, ie. Title Deed (Geran Tanah) and in the Register of Titles. A lease that is not registered, is void.

This registration is important for the lessee, as his/her interest in the property is made known to other relevant parties.

Duration of Lease

Section 221 (3) of the National Land Code further provides that every lease granted shall be for a term of exceeding three years and that the maximum term shall be 99 years if it relates to the whole of any land, and 30 years if it relates only a part of it.

What is a Tenancy?

Traditionally, the word ‘tenancy’ is referred to letting for short periods. 

The ‘landlord’ who owns a property grants a tenancy to the ‘tenant’ who pays rent to the landlord periodically such as weekly, monthly, quarterly or yearly.

Tenancy is Exempted from Registration

Unlike a lease, a tenancy is exempted from registration. In this case, if a third party is buying the land or property, or creating a charge using the property, such a party may not be aware of any earlier tenancy agreement or transaction.

Duration of Tenancy

Under Section 213(1)(a) of the National Land Code, a tenancy means ‘any tenancy or sub-tenancy for a term not exceeding three years’.

Section 213(2) of the National Land Code also provides that
(a) a tenancy shall be valid whether it is effected in writing or verbally by word of mouth, and
(b) if the tenancy is effected by writing, the instrument shall not be capable of registration.

These two main differences are merely the basic understanding about lease vs tenancy. There are of course specific legal bindings and conditions that differentiate the both. For further reading, you can check it out here: https://bit.ly/MalaysianLitigatorLeaseVsTenancy

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This article is intended to convey general information only. It does not constitute advice for your specific needs. This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation.

Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.

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